In recent months and years, the ATO has been particularly focused on stamping out related-party borrowing in superannuation, which in effect refers to borrowing from a source that is not commercial, like a bank or credit union.
The Tax Office has been concerned about borrowing on non-commercial terms for various reasons, including that SMSFs could be securing rates and structures that would otherwise not be accessible for other funds.
This financial year, the ATO has new data matching capability on its hands, and national leader of superannuation at accounting firm BDO, Shirley Schaefer, believes it’ll be all eyes on borrowing arrangements.
“Now that all those tax returns have been lodged, you might find the ATO does a bit of data matching and undertake a few reviews in this area,” said Ms Schaefer.
If it’s found that funds are not operating on commercial terms, they could be hit with the non-arm’s length income provisions, or NALI, which could mean a tax bill of up to 15 per cent. NALI is taxed at the top personal marginal rate.
This is the latest in a string of clampdowns from the government and regulators on borrowing in superannuation.
At the moment, a bill is before the Senate to have the outstanding loan amount on a borrowing within super added to a member’s total super balance. In many cases this has made borrowing in superannuation less attractive, as it means a leveraged asset could push a superannuation fund over the prescribed caps.